The Treasury Department and the Small Business Administration have been slowly providing additional clarity to the massive Paycheck Protection Program via their Frequently Asked Questions PDF. On May 13, 2020 a new FAQ was added to help bring some insight concerning the good-faith certification.
FAQ #46 – One we’ve been waiting for
FAQ #46 answers “How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?”
Original Balance Less Than $2 Million
For original balance loans less than 2 million, “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”
The bottom line: This safe harbor for loans less than 2 million is deemed appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity.
Original Balance OVER $2 Million
Borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance.
If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request.
The bottom line: If the original loan is over 2 million dollars the SBA will review the loan. If found that the borrower lacked adequate basis for the required certification concerning the necessity for the loan, the SBA will seek repayment of the outstanding loan amount. If the borrower repays the loan after receiving notification from SBA then they will not pursue administrative enforcement or referrals to other agencies.
Extended PPP Deadline
SBA is extending the repayment date for this safe harbor to May 18, 2020. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. SBA intends to provide additional guidance (View Here) on how it will review the certification prior to May 18, 2020.